Get complete information on the Payment of Insurance Claims

Get complete information on the Payment of Insurance Claims

The insurer should be informed about the loss as soon as the loss occurs. On receiving the notice, the Insurer appoints an assessor to examine the facts of the case and to determine the amount of liability. The assessor is an expert person having the ability and experience in handling claims.

The assessor is empowered to act and make necessary arrangement on behalf of the insurer. He goes to the site of fire and, personally, examines the damaged property and collects all available information. The assessor gets the idea of ‘the nature’ and extent of the damage, the origin and cause of fire.

Usually, the assessor asks from the insured about the loss to avoid future dispute between the insured and the insurer. The insured is suggested to separate the salvage or undamaged part from the damaged part to reduce the possibilities of further damage and to evaluate the amount of loss correctly. Steps are taken to check that

(i) The policy is in force on the date of occurrence of the loss or damage;

(ii) The loss or damage is by a peril insured by the policy;

(iii) The property affected by the loss is the same as insured under the policy.

(vi) Notice of loss is received without undue delay.

After the initial check up, a number is allotted to the claim and entered in the claims register. A separate docket is opened for filling the claim papers and a copy of policy.

The face of the docket provides for printed columns for incorporating claim number, policy number, date of loss, estimated amount of loss, date of survey, name of the surveyor, etc.

A claim form is issued to the policyholder.

The claim form requires the following information:

(i) Full description of circumstances of the loss such as date of loss time, the place of fire.

(ii) Cause of fire.

(iii) Particulars of the property affected by the loss such as description, value at the time of fire, value of salvage and the claim amount.

(iv) Statement of other insurances on the property, name of the insurer, the policy number and the sum insured.

(v) Sound value of all the property.

The claim is recorded in the docket of claim, where facultative reinsurance is involved, an advice of the loss is sent to the insurers.

The survey report of the assessor contains the following information.

(i) Cause of loss:

It is necessary to know whether the fire was caused by an excepted peril or was caused by the negligence of a third party or there was any evidence of fraud. So, the cause of fire is clearly obtained.

Often the exact cause and origin of fire cannot be accurately established. In such cases the available evidence will have to be carefully examined to support a plausible cause.

(ii) The amount recommended for payment which is determined on the basis of current market value and under-insurance.

(iii) Detail and value of salvage. The method to dispose it off,

(iv) Details of expenses involved in extinguishing fire and salvage corps charges.

(v)The position in respect of compliance with the warranties.

(vi) Apportionment of the loss and expenses among the insurers where there are more than one insurer.

(vii) The assessor can judge whether the fire has been started at more than one place and whether it is a case of arson. He will inquire whether there is a breach of warranty or negligence on the part of the insured.

(viii) The exact amount of loss payable by the insurer/the presence of the average clause in the policy will determine the amount of loss payable.

On receipt of the claim form duly completed and the survey report, the claim is processed and, if it is in order, a discharge voucher is to be signed by the insured. The amount of loss payable by the insurer is usually settled by agreement between the insurer and the insured otherwise the matter has to be referred to arbitration.

Market value of the damaged property is usually taken into account while calculating the amount of loss. Sometimes, the cost of replacement is considered for the purpose. But, it is prevalent only in advanced countries because the insurers have well-equipped staff of replacement.

Before the cheque in settlement of the claim is released, the payment is recorded in the claims register and the claim docket. It is essential that the salvage recoveries should be correctly recorded in the claims register. The payment is recorded in the relative policy file and the sum insured is reduced by the amount of the claim.

The sum assured can be reinstated on payment of proportionate premium from the date of reinstatement of the sum insured to the date of expiry of the policy.

When the amount of loss is estimated to be small and the cost of investigation is disproportionately high.

The survey is dispensed with and the claim is processed and settled on the basis of the complete claim form. When the insurance is on co-insurance basis, the surveyor is appointed by the leading office.

Each co-insurer is sent a preliminary advice of the claim followed by a copy of the final survey report which indicates the apportionment of the loss among the co-insurers. Generally the leading office settles the entire loss and recovers the proportionate shares of the loss and expenses from the co-insurers.

Salvage Corps:

Fire Salvage Association was incorporated in 1925 as a company registered by guarantee and the insurance companies are members of the Association.

The main objects of the Association are to provide a fully trained corps to salvage materials from the buildings on fire, to protect them from water damage, to restore them to serviceable conditions after fire fighting operations are completed.

The corps also renders following services to the fire sub-committee, Bombay, of the Tariff Advisory Committee.

1. Checking the fire hydrants in the Cotton Green Storage area.

2. Inspection of sprinklers in the godowns in the Cotton Green area,

3. Training of the fire fighting squads in the textile mills.

4. Provision of facilities to the Fire Sub-committee to test fire sprinkler heads and other fire extinguishing appliances.

5. Reporting on unusual features observed on the premises at the time of fire extinguishment.

Application of Average Clause in Payment of Claim:

When insurance is subject to the ordinary, or Pro Rata condition of Average, i.e., under-insurance, the liability of the insurers is restricted to that proportion of the loss that the sum insured bears to the value of the property at the time of the destruction or damage.

The insurer’s liability in the event of a claim under a policy subject to average, the loss is assessed in the ordinary manner, but the amount payable is determined after a comparison of the sum insured and the value of the property. Where under-insurance exists, the liability of the insurers is limited.

The Pro Rata Condition of Average:

“Whenever, a sum insured is declared to be subject to average, if the property covered thereby shall at the breaking out of any fire or at the commencement of any destruction of or damage to such property by any other peril hereby insured against the collectively of greater value than such sum insured, then the insured shall be considered as being his own insurer for the difference and shall bear a rate able share of the loss accordingly.”